Car companies are losing production because of Russia’s invasion of Ukraine but are beginning to find new sources for the crucial wiring harnesses that the country specialises in.
Vehicle production could be down as much as 15% in Europe in the first half of this year because of the war, bank Wells Fargo has estimated, further depressing output during the wider semiconductor shortage.
BMW has said that production at its factories, including the Mini plant in Oxford, will return to normal this week after shutdowns caused by parts shortages, but the company also said in a statement that it expects continued supply restrictions linked to the war.
Other car makers forced to slow production because of war-related shortages include Audi, Mercedes-Benz, Porsche, Skoda and Volkswagen.
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Nissan said its production in the UK hasn’t been affected so far, while Jaguar Land Rover didn’t respond to our question.
Ukraine has 17 factories that make wire harnesses, according to Wells Fargo, with key German supplier Leoni locating two big sites there.
Harnesses are an assembly of electrical cables that act as the car’s central nervous system. While they themselves are not that high-tech, they are difficult to re-source and cannot be added into a car after production.
Other key supplies for car makers coming from Ukraine include neon gas, needed to make chips, as well as the precious metal palladium, used in catalytic convertors.
The country is also a key source of nickel ore, which is refined into cathode materials to make batteries for electric vehicles.
In addition, the war is having an impact on UK exports. Key makers in the UK, including Jaguar Land Rover and Aston Martin, have stopped car shipments to Russia after issues with logistics and payment systems and the collapsing value of the Russian rouble made exports almost impossible. Aston Martin, for example, said the reason for its pause was the “operational impact” of the sanctions. Other firms such as Honda, Volkswagen and Volvo are also affected.
Cars were the UK’s biggest export to Russia last year, figures from the Office for National Statistics show, meaning significant revenue is being lost from a market that had contributed healthy luxury sales.
Meanwhile, British car retailing group Inchcape has said it is transferring ownership of its Russian dealers to a local operator, taking a £750 million hit in the process.
Inchcape makes around 5% of its profit in Russia, selling cars for 11 brands including BMW, Jaguar, Land Rover, Mini and Rolls-Royce.
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